NEW YORK and POZNAN, Poland, Nov. 18, 2010 (GLOBE NEWSWIRE) -- Sunset Suits Holdings, Inc. (OTCBB:SNSX), a leading designer and retailer of high quality menswear, today provided a business update and reported financial results for the quarter ended September 30, 2010.
Mr. Miroslaw Kranik, Chief Executive Officer of Sunset Suits, commented, "We are pleased to report that the benefits of our strategic initiatives are beginning to take hold in a substantial way. This was evident in our third quarter results as gross margins increased to 61.2% from 54.6% in the third quarter of last year and from 55.1% in the second quarter of 2010. Our goal is to increase margins to a sustainable 70% level, and we are trending well to achieve that goal."
"The decrease in revenue in the third quarter of this year was partly attributable to having fewer retail outlets and partly due to lower inventory levels in our stores stemming from a liquidity crunch that we are working to rectify. The store reduction was the result of our strategic move to focus on smaller store locations in higher traffic areas, such as shopping malls. We closed 26 underperforming stores since January 1, 2010 and opened 7 stores in mall locations during the period. The total number of stores in Poland stands at 69 as of September 30, 2010, down from 88 stores at September 30, 2009."
"Sales began to pick up during the third quarter of 2010 and heading into the fourth quarter, we are seeing a continuation of these favorable sales trends at Sunset Suits. Our product mix, sales incentives, pricing strategy and generally improving economic conditions are helping to increase revenue, while our shift to an outsourced manufacturing model and other austerity measures are improving our bottom line.
We maintain our net income guidance of at least $2.0 million, or $0.16 per share for 2010, and $3.4 million, or $0.27 per share for 2011.
According to PMR Research, a well-recognized market research company specializing in Central and Eastern Europe, the total clothing and footwear market in Poland reached $9.5 billion in 2008 and decreased to $8.9 billion in 2009. PRM estimates the market will resume growth to $9.4 billion in 2010.
Revenue for the three months ended September 30, 2010 was $5.3 million, as compared to $6.9 million for the three months ended September 30, 2009, a decrease of 22.6%. The difference in revenue primarily reflects the closing of 26 unprofitable retail outlets since January 1, 2010. The company opened seven stores during that period. Gross profit was $3.3 million for the third quarter of 2010, as compared to $3.8 million for the third quarter of 2009. Gross margin for the third quarter of 2010 was 61.2% versus 54.6% in the comparable period in 2009. Operating loss was $1.0 million for the third quarter of 2010, as compared to an operating loss of $941,000 for the third quarter of 2009. The operating loss in the third quarter of 2010 includes a loss on disposal of fixed assets, net, of $421,000. Net loss from continuing operations was $370,000 for the third quarter of 2010 compared to a net loss of $975,000 in the comparable period last year. Net income from discontinued operations was $0 versus income from discontinued operations of $754,000 in the third quarter of 2009. Net loss for the third quarter of 2010 was $370,000, or $0.03 per share versus a net loss of $221,000, or $0.02 per share in the third quarter of 2009. Shares outstanding at September 30, 2010 totaled 12,499,645 versus 12,499,645 at September 30, 2009.
About Sunset Suits Holdings
Sunset Suits is a designer and retailer of high quality menswear based in Poland. The company's merchandise includes suits, sport coats, slacks, dress shirts and ties. Sunset Suits distributes its clothing primarily through its sales outlets. The company operates 69 domestic retail stores in Poland, 3 stores in Latvia, 8 stores in the Czech Republic, and 5 stores in Lithuania. Sunset Suits targets men in the 18 to 35 year-old age group, one of the most rapidly developing demographics in the industry.
The Sunset Suits Holdings, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=8346
This press release may contain forward looking statements. These forward looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, forward-looking statements contain terms such as "anticipates," "believes," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "projects," "should," "would" and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect the Company's current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, readers should not place undue reliance on these forward-looking statements. These forward-looking statements include, among other things, statements relating to: general economic conditions; expectations regarding the Company's ability to maintain and grow its business; expectations regarding the continued growth of the Polish clothing industry; beliefs regarding the competitiveness of the Company's products; expectations with respect to increased revenue growth and the ability to achieve increased profitability; future business development, results of operations and financial condition; and competition from other apparel companies. Also, forward-looking statements represent the Company's estimates and assumptions only as of the date of this press release and actual future results may be materially different from what the Company expects. Readers are encouraged to review the "Risks Factors" section in the Company's Registration Statement on Form S-1/A filed on January 12, 2010. The Company assumes no obligation, and does not intend, to update any forward-looking statements, except as required by law.
| Consolidated Statement of Operations | ||||||||
| (All amounts in thousands of U.S. dollars, except per share amounts) | ||||||||
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||
| 2010 | 2009 | 2010 | 2009 | |||||
| unaudited | unaudited | unaudited | unaudited | |||||
| Net sales, retail shops | $5,328 | $6,880 | $14,479 | $20,011 | ||||
| Cost of goods sold | 2,069 | 3,124 | 6,296 | 7,942 | ||||
| Gross profit | 3,259 | 3,756 | 8,183 | 12,069 | ||||
| Operating expenses: | ||||||||
| Sales and marketing, including: | 3,746 | 4,299 | 10,586 | 11,847 | ||||
| expenses from related parties | 304 | 513 | 948 | 1,576 | ||||
| expenses from unrelated parties | 3,442 | 3,785 | 9,639 | 10,271 | ||||
| General and administrative | 122 | 357 | 934 | 1,203 | ||||
| Total operating expenses | 3,868 | 4,655 | 11,520 | 13,050 | ||||
| Gain (loss) on disposal of fixed assets, net | (421) | (41) | (856) | (43) | ||||
| Operating income(loss) | (1,031) | (941) | (4,194) | (1,024) | ||||
| Interest income | 14 | 0 | 43 | 11 | ||||
| Interest expense | 212 | 157 | 453 | 444 | ||||
| Gain (loss) on transaction in foreign currency | 728 | 9 | (129) | (02) | ||||
| Income (loss) before income taxes | (500) | (1,088) | (4,733) | (1,459) | ||||
| Income tax (expense) benefit | 130 | 113 | 1,298 | 285 | ||||
| Income (loss) from Continuing Operations | ($370) | ($975) | ($3,434) | ($1,174) | ||||
| Discontinued Operations: | ||||||||
| Income (loss) from discontinued operations, net of tax of $ 0 for the three months ended September 30, 2010, $87 for the nine months ended September 30, 2010 and respectively $197 and $362 | 0 | 754 | (509) | (667) | ||||
| Gain on disposal of production facility held for sale, net of tax | 0 | 0 | 6,831 | 0 | ||||
| Income (loss) from Discontinued Operations | $0 | $754 | $6,321 | ($667) | ||||
| Net Income (Loss) | (370) | (221) | 2,887 | (1,841) | ||||
| Earnings (loss) per share | ||||||||
| Continuing operations | ($0.03) | ($0.08) | ($0.27) | ($0.09) | ||||
| Discontinued operations | $0.00 | $0.00 | $0.51 | ($0.05) | ||||
| Earnings (loss) per share (basic and diluted) | ($0.03) | ($0.02) | $0.23 | ($0.15) | ||||
| Shares used in computing per share amounts: | ||||||||
| Weighted average common shares outstanding | 12,499,645 | 12,499,645 | 12,499,645 | 12,499,645 | ||||
| Consolidated Balance Sheets | ||||||
| (All amounts in thousands of U.S. dollars) | ||||||
| Balance Sheet as of | ||||||
|
September 30, 2010 |
December 31, 2009 |
|||||
| unaudited | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $179 | $379 | ||||
| Accounts receivable | 1,997 | 1,261 | ||||
| Receivables from related parties | 1,232 | 815 | ||||
| Other trade receivables | 765 | 446 | ||||
| Inventories | 2,843 | 3,220 | ||||
| Deferred taxes | 675 | 734 | ||||
| Prepaid expenses and other current assets | 1,583 | 235 | ||||
| Assets held for sale | 0 | 3,653 | ||||
| Total current assets | 7,278 | 9,482 | ||||
| Non-current assets | ||||||
| Property and equipment, less accumulated depreciation and amortization | 3,365 | 3,767 | ||||
| Other intangible assets, net | 2,085 | 2,140 | ||||
| Deferred taxes | 5 | 24 | ||||
| Long term investments | 2,072 | 2,538 | ||||
| Assets held for sale | 0 | 7,694 | ||||
| Total non-current assets | 7,527 | 16,164 | ||||
| Total assets | $14,805 | $25,646 | ||||
| Balance Sheet as of | ||||||
|
September 30, 2010 |
December 31, 2009 |
|||||
| unaudited | ||||||
| LIABILITIES AND STOCKHOLDERS EQUITY | ||||||
| Current liabilities: | ||||||
| Short-term borrowings | $284 | $41 | ||||
| Current portion of finance lease payable | 3 | 3 | ||||
| Current portion of long-term debt | 2,517 | 1,823 | ||||
| Accounts payable | 5,886 | 3,335 | ||||
| Income and other taxes payable | 3,894 | 3,300 | ||||
| Accrued employee compensation and benefits | 827 | 414 | ||||
| Accrued liabilities and other | 208 | 296 | ||||
| Liabilities associated with assets held for sale | 0 | 9,808 | ||||
| Total current liabilities | 13,620 | 19,020 | ||||
| Non-current liabilities: | ||||||
| Provisions | 216 | 138 | ||||
| Long-term debt | 4,225 | 4,942 | ||||
| Liabilities associated with assets held for sale | 0 | 7,753 | ||||
| Total non-current liabilities | 4,449 | 12,832 | ||||
| Stockholders equity: | ||||||
| Preferred stock $0.001 par value,shares authorized and issued: none | 0 | 0 | ||||
| Common stock, $0.001 par value, shares authorized: 12,499,645 shares issued 12,499,645 | 12 | 12 | ||||
| Additional paid-in capital | 11,883 | 11,883 | ||||
| Net income (loss) | 2,887 | (5,034) | ||||
| Retained earnings (deficit) | (9,976) | (4,942) | ||||
| Accumulated other comprehensive income (loss) | (8,070) | (8,125) | ||||
| Total stockholders equity | (3,264) | (6,207) | ||||
| Total liabilities and stockholders' equity | $14,805 | $25,646 | ||||
| Cash Flow Statement | |||||||
| (All amounts in thousands of U.S. dollars) | |||||||
|
Nine Months Ended September 30, 2010 |
Nine Months Ended September 30, 2009 |
Twelve Months Ended December 31, 2009 |
|||||
| unaudited | unaudited | ||||||
| Cash flows from operating activities: | |||||||
| Net income (loss) | $2,887 | ($1,841) | ($5,034) | ||||
| Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: | |||||||
| Depreciation and amortization | 500 | 649 | 1,017 | ||||
| Loss (gain) on property and equipment disposals | 856 | 12 | 589 | ||||
| Gain on sale of production facility held for sale | (6,831) | 0 | 0 | ||||
| Deferred income taxes | 56 | (271) | (766) | ||||
| Changes in assets and liabilities: | |||||||
| Accounts receivable | (706) | 449 | 2,858 | ||||
| Inventories | 362 | (420) | 351 | ||||
| Prepaid expenses and other current assets | (1,183) | (630) | (1,629) | ||||
| Accounts payable | 2,448 | 1,117 | 1,636 | ||||
| Other liabilities | 1,979 | 2,192 | 2,835 | ||||
| Net cash provided by (used in) operating activities | 371 | 1,256 | 1,857 | ||||
| Cash flows from investing activities: | |||||||
| Purchases of investments | (65) | 2 | (1) | ||||
| Proceeds from the sale of production facility held for sale | 16 | 0 | 0 | ||||
| Purchases of property and equipment | (525) | (1,213) | (1,372) | ||||
| Proceeds from sale of property and equipment | 0 | 21 | 0 | ||||
| Net cash provided by (used in) investing activities | (573) | (1,190) | (1,373) | ||||
| Cash flows from financing activities: | |||||||
| Principal payments under capital lease | (24) | (91) | (142) | ||||
| Proceeds from short and long term debt | 246 | 0 | 26 | ||||
| Repayments of borrowings | (152) | (683) | (1,001) | ||||
| Net cash provided by (used in) financing activities | 69 | (774) | (1,117) | ||||
| Effect of exchange rate changes on cash and equivalents | (68) | (48) | (80) | ||||
| Net change in cash and equivalents during period | (200) | (755) | (713) | ||||
| Cash and equivalents, beginning of period | 379 | 1,102 | 1,102 | ||||
| Cash and equivalents, end of period | $179 | $346 | $388 | ||||
| Less asset held for sale (discontinued operation) | $0 | 0 | 9 | ||||
| Cash and equivalents, end of period | $179 | $346 | $379 | ||||